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CS Professional · Corporate Restructuring, Valuation and Insolvency · Debt Recovery and SARFAESI

Vinayak Finance, a financial institution, assigned a defaulted loan to an ARC. The ARC now claims the dues in a DRT application. Under the Recovery of Debts and Bankruptcy Act, 1993 definition of 'debt', which feature of the liability does NOT prevent it from being a debt?

Assignment does not prevent a liability from being a debt. The definition covers liabilities claimed by a bank or financial institution in the course of business, whether secured, unsecured or assigned, provided they are subsisting and legally recoverable on the date of the application.

  1. AIt has been assignedCorrect
  2. BIt is claimed by an individual moneylender
  3. CIt is not legally recoverable on the date of the application
  4. DIt was not incurred during any business activity of the claimant

Explanation

Debt covers liability claimed during the course of business activity by a bank or financial institution, whether secured or unsecured, or assigned. Assignment therefore does not take it out. The other options fail the requirement of a bank or financial institution claimant, business activity, or legal recoverability on the application date.

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